This intensive economics question goes over calculating equilibrium price and quantity, then using those numbers to get consumer and producer surplus, and finally implementing a tax to see how that will change the previous results:

1. The inverse demand curve (or average revenue curve) for the product of a perfectly competitive industry is give by p=80-0.5Q where p is the price and Q is the quantity. The short-run industry marginal cost function is MC=50+0.25Q

a) Calculate the equilibrium price and quantity assuming perfect competition and profit maximization and hence calculate the consumer and producers' surplus.